| Good morning, and welcome to all the new Brew readers who've joined recently. We can say with a high degree of certainty that not every newsletter will focus on a struggling video game retailer named GameStop. But this one does. | | | |  | NASDAQ | 13,270.60 | - 2.61% | | | | S&P | 3,750.77 | - 2.57% | | | | DOW | 30,303.17 | - 2.05% | | | | GOLD | 1,842.30 | - 0.46% | | | | 10-YR | 1.016% | - 2.50 bps | |  | OIL | 52.63 | + 0.04% | | | *As of market close. Here's what these numbers mean. | - Economy: At the conclusion of its meeting, the Federal Reserve confirmed what we suspected—that it'll keep interest rates near zero and that it's fully committed to guiding the economy back to health. The central bank acknowledged that the recovery has leveled off in recent months.
- Markets: Stocks not mentioned on r/WallStreetBets had a pretty rough go, posting their worst single-day percentage drop in three months.
| |  Toby Howell | Over the past week, the business world's attention has been hijacked wholesale by an army of amateur traders looking to make fools of the traditional finance industry. Yesterday brought more absurdity: - After a 135% gain, GameStop stock closed at $348/share. One week ago it was at $43 and last summer it was at $4.
- AMC Entertainment shares exploded 301%. No, people aren't going to the movies more often.
The run-up in GameStop was so dramatic that short-seller Citron Research, which bet on the stock to drop, was forced to close out most of its position "at a loss of 100%," according to managing partner Andrew Left. Let's get deep There's a general feeling that the GameStop saga speaks to something larger about the nature of financial markets, and even our culture. To try to make sense of it all, we've distilled some of the most popular theories that...try to make sense of it all. 1. The "stick it to the man" theory: This theory suggests that these traders are motivated primarily by their disdain for "suits," the longtime wardens of Wall Street, who, Redditors argue, exploited the little guy to get filthy rich. - As Bloomberg's John Authers writes, "The people investing today are driven by righteous anger, about generational injustice, about what they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later, and about lacerating poverty and inequality."
2. The "everyone's super bored" theory: Without much else to do during the pandemic, people have turned to the stock market as a form of entertainment...and to make a lot of money. Last summer, individual investors accounted for roughly 20% of stock market activity on average, up from 10% in 2019. 3. The "Robinhood" theory: The rise of the amateur investor can be traced back to Robinhood, the app that pioneered no-fee trading and empowered individuals to influence the stock market like never before. 4. The "memeification of society" theory: Some observers have linked the behavior of Reddit's trading army to other online communities like 4chan that engage in "astroturfing" campaigns. "If you can create enough hype around something, through memes, conspiracy theories, and harassment campaigns, you can manifest it into reality via capital," Ryan Broderick writes. Looking ahead...the community behind these frenzied trades ran into some trouble last night. Discord banned the r/WallStreetBets server for violating its policies on hate speech, and moderators of the Reddit forum briefly made it private. | |  Francis Scialabba | Like Mark McGwire when he returned from the offseason with a neck the size of a tree trunk, GameStop's stratospheric rally has caught the attention of regulators. White House press secretary Jen Psaki said yesterday that President Biden's economic team, including Treasury Secretary Janet Yellen, were "monitoring the situation." The SEC also put out a statement saying it was keeping tabs on the "on-going market volatility." Will there be any action? Probably not. Without clear signs of fraudulent behavior—like buying a stock for the sole purpose of pushing the price up, then selling it—regulators can't prosecute brazen enthusiasm alone. That's not to say there is nothing risky about what's going on; Massachusetts regulator William Galvin told CNBC that the mania around GameStop "undermines the system" and could shake confidence in the integrity of the entire US stock market. Bottom line: To make sure retail investors don't roll too many gutter balls, online brokerages are setting up bumpers of their own. TD Ameritrade placed "several restrictions" on some transactions involving GameStop, AMC, and other r/WallStreetBets favorites yesterday. | | | Apple, Tesla, and Facebook, companies we used to think were interesting before GameStop happened, all reported earnings yesterday. Apple is to business as the Andy Reid-coached Chiefs are to football offenses. It had its most profitable quarter ever ($28.8 billion), and revenue topped $100 billion for the first time. - Sales in every product category increased by double-digit percentage points. Plus, revenue in Greater China gained 57%.
Tesla's report was a tale of two lines: The top one ($10.7 billion in revenue) beat Wall Street's expectations, while the bottom line missed. - Still, that bottom line was more than zero, meaning 2020 was Tesla's first profitable full year ever.
- Elon Musk's EV company fell just 450 cars shy of its ambitious yearly target of half a million vehicle deliveries.
Facebook posted record numbers for both revenue and profit...but warned of storm clouds ahead, including 1) possible curbs on user data collection and 2) the pandemic-era e-commerce boost backsliding as vaccines roll out. | | SPONSORED BY POLICYGENIUS | | ...is paying too much to protect your humble abode. That's why, when you shop for insurance, you can trust Policygenius to find the best rate. Their team of insurance buffs will help you find your lowest rate from their marketplace of 30+ top insurers. Policygenius makes it easy for you to understand your options, compare quotes, and buy a policy—all in one place. So instead of spending hours checking websites, texting your parents, and looking up unsexy terms like "dwelling coverage" and "personal umbrella insurance," Policygenius does the legwork for you and looks at all the ways to maximize your savings, including bundling your home and auto policies. In fact, they've saved customers an average of $1,055 a year by re-shopping their home and auto insurance—which is actually pretty sexy. Compare quotes and see how you can save with Policygenius today. | |  Francis Scialabba | Yesterday, President Biden issued a moratorium on new oil and gas leases on federal land, following through on a campaign pledge. What does that mean? Like the pronunciation of "pecan" or "caramel," it depends on where you come from. - For drillers in states where federal land comprises the bulk of drilling areas, like New Mexico and Wyoming, it's a big problem.
- For drillers in states where most drilling land is state- or private individual-owned, like Pennsylvania and Texas, it's not such a big deal, though it could complicate things like the construction of new pipelines.
- For climate activists: It's a step in the right direction. Some have pushed Biden to take a bigger swipe at the fossil-fuel industry by banning fracking, which he's opposed to, but many applauded yesterday's move.
Reality check: Many energy operators went on a permit-buying spree in the final months of the Trump administration, so they won't be affected by the freeze until further down the line. But...they will be affected, and energy industry groups have already brought legal challenges. | |  Our World in Data | This map from Our World in Data (incredible site, btw) shows the number of Covid-19 doses administered per 100 people in every country. If you squint and zero in on the Middle East, you can identify the leader Israel and runner-up United Arab Emirates. Here's the top 10 as of yesterday evening: - Israel: 49.1 doses per 100 people
- UAE: 27.9
- United Kingdom: 11.3
- Bahrain: 8.5
- US: 7.1
- Italy: 2.6
- Germany: 2.4
- France: 1.8
- China: 1.6
- Russia: 0.7
Bottom line: The public health world is looking to Israel for signs of vaccine effectiveness. And the early results are encouraging: Vaccines (even after just one dose) appear to be causing significant drops in Covid infections. But for now, the new coronavirus strain is keeping Israel's economy shut down—the government temporarily banned all international flights. | | - Boeing posted its largest annual loss on record in 2020. It took a $6.5 billion charge related to its new 777X plane, whose rollout was pushed back to late 2023.
- US states are slowly lifting restrictions on businesses as coronavirus cases recede.
- The EU and AstraZeneca are playing the blame game over a delay in Covid vaccine deliveries.
- The "reimagined" Sundance Film Festival kicks off today.
| |  Francis Scialabba | This is about the time when we start leaving New Year's resolutions in the rearview mirror. If you could also use a push to stay on track, try checking out one of these books. - Atomic Habits by James Clear is a Bookshelf repeat...but also just a top-notch guide to hacking your habits one day at a time.
- Read This For Inspiration by Ashly Perez packages beautiful illustrations with bite-size nuggets of wisdom to help you find daily motivation and, well, inspiration.
- New Power by Jeremy Heimans and Henry Timms examines how systems of power have changed in the modern, networked era and the new rules of success you need to play by.
Looking for something else? Brew's Bookshelf has plenty of recommendations for other business-related reads. | | | Yes, the stock market has been crazy...but if we're being frank so has the rest of the world. Three of these absurd headlines are real, while one is made up. Can you spot the fake? - "Geologist finds rare formation inside rock that looks exactly like Cookie Monster on Sesame Street"
- "Psychedelics ETF to launch after sector attracts Thiel's money"
- "Beijing's latest weapon in its war on COVID-19: anal swabs"
- "'We're living in a simulation': the winning Mega Millions lottery ticket perfectly matches the mysterious numbers sequence from the TV show 'Lost'"
| | | The Mega Millions numbers sadly did not match up with Lost. | | | ** A Note From Domini Impact Investments The Domini Funds are not insured, are subject to certain risks, and are available only to US investors by prospectus offer. Please review full legal disclosure here. You may lose money. | | |
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